An interesting comment here from the head of Syngenta: "Things we don't control can derail us." Don't control or can't control? The kind of problem he's talking about - of GM genes ending up where they're not wanted - seems endemic to the industry.
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A Tough Row
Tatiana Serafin
Forbes, 7 Nov 2005
http://www.forbes.com/forbes/2005/1114/195_print.html

In the race to woo U.S. farmers with genetically modified seeds, Swiss Syngenta is up against Monsanto. It's one ugly contest.

John Pedersen has farmed his his third-generation homestead for 38 years. He and his wife, Connie, have also been dealers for Golden Harvest, which sells conventional and genetically modified seeds for corn and soybeans, over the last 15 years. But now their twin livelihoods are in trouble. Last November the Pedersens received a letter informing them that, within a year, they shouldn't count on biotech seeds from Golden Harvest anymore. The warning came from Monsanto, which licenses the technology for those modified seeds and plans not to renew the agreement. Coincidentally, the licensee for the last year and a half is Monsanto's chief competitor: Syngenta AG of Basel, Switzerland. "We're being strangled," says Connie.

So is Syngenta, which is betting its future on sales to American farmers, who spend $3.6 billion a year on bioengineered seeds. But to set down roots in the U.S., Syngenta (2004 revenue: $7.3 billion) relies on certain Monsanto technology until it gets approval for its own rival seeds. And Monsanto, whose modified seeds are planted in half of all cornfields and more than three-quarters of soy fields in the U.S., isn't willing to surrender a square inch of its virtual monopoly without a fight. Michael Pragnell, Syngenta's chief executive, is happy to put up his dukes. "Farmers don't like being held ransom to one supplier," he says.

Syngenta's progenitor, Ciba-Geigy, toyed with biotech in the mid-1990s when it introduced an insect-resistant corn seed. In November 2000, when Syngenta was formed from agricultural units of Novartis and Zeneca, biotech seed sales were a paltry $171 million, or 2% of sales (up through mid-2005 they amounted to $431 million, or 8%). Pragnell spent his first two years laying off 3,000 or so employees and closing overlapping manufacturing and research sites (trimming costs by $362 million by 2002). Sales of Syngenta's bread-and-butter pesticide, fungicide and herbicide sprays, which have hovered between 80% and 85% of revenue, were threatened largely because farmers planting hardier genetically modified seeds needed them less. So Pragnell put his money on the newfangled stuff sold to U.S. farmers.

Trouble was, Syngenta had but one biotech offering of its own; as a result, it has had to play catch-up from a standing start. Its U.S. brand, NK, licensed an herbicide-tolerant technology for soybeans from Monsanto. Its modified seeds to protect against corn rootworm won't be on the market until 2007. Monsanto, by contrast, already has so-called triple-stacked seeds that protect against an herbicide, as well as against two insects; Syngenta's may be out by 2008. The ultimate prize, awaiting federal approval, is a corn-seed additive that is more digestible to animals than traditional (prebiotech) corn and another that can better resist drought. "Long-term independence will come when we get regulatory approval for our own products," says Pragnell, a Brit who spent 20 years at Courtaulds Plc., the giant textile company, before heading to Zeneca Agrochemicals. In the States approval involves a combination of thumbs-ups from the U.S. Department of Agriculture, the Environmental Protection Agency and/or the Food & Drug Administration. That's on top of field testing, which can take two years or more.

Monsanto has a three-year lead on altered seeds. The St. Louis agrogiant is madly boring into biotech, as it must. With its chemicals business, Solutia, spun off but still a legal liability, and its previously bestselling pesticide, Roundup ($2 billion in sales and falling), now off-patent, genomics and seeds represent its best hope and 52% of its $6.3 billion in sales for the fiscal year ended Aug. 31.

Pragnell had plenty of cash to buy into the game. However, the shortlist of suitable acquisition targets--which license their seeds--has put Syngenta in the untenable position of both partnering and colliding with Monsanto. As a result the two rivals are fighting it out less in the fields than in the courthouse.

In May 2004 Syngenta acquired from Bayer the rights to produce corn seed that can tolerate the herbicide glyphosate, providing the same protection against weeds as Roundup. But Monsanto, claiming it had developed the herbicide-tolerant technology, retaliated. In a patent-infringement suit it alleges that the rights to that technology could not be transferred from Bayer to Syngenta. Monsanto later sent letters to farmers, ominously suggesting that certain biotech seed brands (read: Syngenta's) were "illegal" for human consumption in Europe--and hence useless for export. Some farmers called the threat crude propaganda and continue to send their crops for animal use.

Pragnell's next acquisitions sparked similar flare-ups. His $680 million purchase of U.S. seed players Garst and Golden Harvest in June 2004 nearly tripled Syngenta's position in gene-spliced corn and soy to 15% of the total market. Soon after, Monsanto pulled the plug on licenses with Golden Harvest and sued Syngenta for patent infringement; Garst licenses probably won't be renewed. A Monsanto rep insists this isn't revenge. The company, he says, is simply enforcing a "change-of-control clause" in the contracts.

Syngenta doesn't quite see it that way. It responded with an antitrust suit in July 2004, alleging that "Monsanto launched a scorched-earth campaign to cut off Syngenta's access to the market"--essentially intimidating farmers into staying away from Garst and Golden Harvest seeds. A related complaint charges Monsanto-owned seed companies with poaching Garst employees to obtain trade secrets. Monsanto says both suits are frivolous and accuses Syngenta of inappropriately exploiting Monsanto technology.

The war of the acres isn't likely to end anytime soon. Syngenta reported a 6% increase in total seed sales for the first half of the year to $1.2 billion, but this was largely driven by the selloff of existing stocks of Golden Harvest and Garst seeds. Until it breaks free with its own seeds, the company must still pay Monsanto an estimated $8 per acre each time it uses the technology, equivalent to giving up 30% of its operating profit, reports analyst Patrick Lambert at equity research firm Helvea. To boot, Monsanto has recently been raising those fees. No big mystery why Syngenta's stock, which trades as an ADR, has been stuck for some time at $21.

Out on the horizon things look brighter. Last year Pragnell began moving his biotech seed R&D operation from the U.K. to the more welcoming Research Triangle Park in North Carolina. Syngenta has some cool ideas in development, from rice that packs a greater vitamin A punch to "biopharmaceuticals," plants that provide raw materials for drugs, as well as hybrid fruits and veggies. But along the way it must avoid dumb mistakes--like the accidental sale announced earlier this year of a strain of modified corn that didn't have regulatory approval. The company had to pay a $375,000 fine. Sighs Pragnell, who is 58: "Things we don't control can derail us."